New financial advice laws increase consumer protection

Consumer group CHOICE says consumers will benefit from new laws passed by the Federal Senate today designed to reduce commissions and improve the education, professional and ethical standards within the financial advice sector.

"These Bills will lift standards for financial advisers and force those still receiving commissions for selling life insurance to clean up their act," says CHOICE Head of Campaigns and Policy Erin Turner.

"We're likely to see a massive reduction in the incentives advisers can receive to sell life insurance as well as changes to increase the professional behaviour of advisers. For example, advisers will have to hold a relevant degree and not just undertake a quick online course before giving customers advice about complex products.

"The new laws will make a real difference to consumers, helping them to trust that the advice they receive is in their best interests.

"We know that when advisers are paid to sell, they will prioritise their bottom-line over customer outcomes. A 2014 ASIC review of retail life insurance advice found that an alarming 37% of advice failed to prioritise the needs of the client and comply with the law.

"Although the new rules will reduce the high commissions advisers can still receive for life insurance advice, we would have liked to see them eliminated completely."

CHOICE also welcomes the formation of a new body that will oversee the development and roll-out of new standards for the advice sector.

"This is a very positive step, with oversight body governed by a board with a balance of industry, education, ethical and consumer expertise to help ensure there's proper oversight of the industry," Ms Turner says.

"We welcome the work done by the Federal Government, the opposition, other parties and industry groups who all worked together with consumer advocates to reach agreement on these new laws."

To read more on CHOICE tests, reviews and campaigns, go to choice.com.au

About CHOICE Set up by consumers for consumers, CHOICE is the consumer advocate that provides Australians with information and advice, free from commercial bias. As vital today as when we were founded in 1959, CHOICE continues to fight for consumers and uncover the truth. By mobilising Australia's largest and loudest consumer movement, CHOICE fights to hold industry and government accountable and achieve real change on the issues that matter most.